Exhibit 10.38


 


FIFTH AMENDMENT TO CREDIT AND
SECURITY AGREEMENT AND WAIVER


 


This FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND
WAIVER (this “Amendment”), dated as of June 15, 2004, is by and
among Option Care, Inc., a Delaware corporation (“Option Care”) and its
domestic subsidiaries party hereto (collectively with Option Care, the
“Borrowers”), JPMorgan Chase Bank and LaSalle Bank National Association, as
Lenders (the “Lenders”) and JPMorgan Chase Bank, as administrative and
collateral agent (the “Agent”).


 


W I T N E S S E T H :


 


WHEREAS, the Borrowers, JPMorgan Chase Bank, LaSalle Bank
National Association, Webster Bank and the Agent are parties to that certain
Credit and Security Agreement, dated as of March 29, 2002 (as amended from time
to time, the “Credit Agreement”);


 


WHEREAS, pursuant to an Assignment and Acceptance between
JPMorgan Chase Bank and Webster Bank dated as of the date hereof (the “Webster
Assignment”), JPMorgan Chase Bank is acquiring all right, title and
interest of Webster Bank in and to the Loans and the Revolving Credit
Commitment of Webster Bank;


 


WHEREAS, the Borrowers have requested that the Lenders amend
the Credit Agreement to, among other things, reduce the aggregate amount of the
Revolving Credit Commitments to $20,000,000;


 


WHEREAS, the Borrowers have informed the Agent that pursuant
an Asset Purchase Agreement dated as of May 25, 2004, Option Care Enterprises,
Inc. sold all of the assets used in the clinical trial business conducted by
Clinical Resource Network, Inc. a Delaware corporation and subsidiary of Option
Care Enterprises, Inc., (“Clinical Resource Network”), to ClinTec
Pharmaceuticals Support Services, Inc. (such sale, the “Clinical Resource
Sale”), in exchange for a Non-Recourse Note issued on May 25, 2004 by ClinTec
Pharmaceutical Support Services, Inc. to Option Care Enterprises, Inc. in the
original principal amount of $164,000 (such note, the “Clinical Resource
Promissory Note”); and


 


WHEREAS, the Agent and the Lenders have agreed to amend the
Credit Agreement on the terms and subject to the conditions provided herein;


 


NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained in this Amendment, the Borrowers, the Lenders and
the Agent hereby agree as follows:


 


1.             Capitalized Terms.  Capitalized terms used herein shall have the
meanings set forth in the Credit Agreement.


 


2.             Amendment to Definition of
Applicable Commitment Fee Rate. 
Effective as of June 1, 2004, the definition of Applicable Commitment
Fee Rate set forth in Section 1.01 of the Credit Agreement is hereby amended by
deleting such definition in its entirety and replacing it with the following:


 


“Applicable Commitment
Fee Rate” means a rate of interest per year equal to thirty-seven and one
half (37.5) basis points.  Anything in
this Agreement to the contrary notwithstanding, after the occurrence and during
the continuance of any Event of Default, the Applicable Commitment Fee Rate
shall equal forty-five (45) basis points.”


 


3.             Amendment to Definition of Fixed
Charge Coverage Ratio.  The
definition of “Fixed Charge Coverage Ratio” set forth in Section 1.01 of the
Credit Agreement is hereby amended by deleting such definition in its entirety
and replacing it with the following:


 


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“Fixed Charge Coverage Ratio” means, as of any date,
the ratio of (a) (i) EBITDA of the Borrowers and their Subsidiaries for the
period of four Fiscal Quarters most recently ended prior to such date
(determined on a consolidated basis without duplication in accordance with
GAAP) minus (ii) the aggregate amount paid by the Borrowers and their
Subsidiaries in cash in respect of the current portion of all income taxes for
such period minus (iii) the aggregate amount of all Non-Financed Capital
Expenditures of the Borrower and their Subsidiaries during such period, to (b)
the sum for the Borrowers and their Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP), of (i) the aggregate amount
of Interest Expense for such period, (ii) the aggregate amount of regularly
scheduled payments of principal in respect of Indebtedness for borrowed money
(including the principal component of any payments in respect of Capital Lease
Obligations) paid or required to be paid during such period, (iii) the
aggregate amount of cash payments in respect of Earn Out Obligations paid or
required to be paid during such period and (iv) the aggregate amount of cash
dividends and distributions paid by the Borrowers and their Subsidiaries during
such period; provided, however, that for the Fiscal Quarter ending
September 30, 2003 and for any fiscal period thereafter which includes such
Fiscal Quarter, the Borrowers shall be permitted to add to the numerator of
such ratio an amount equal to the lesser of (x) the actual amount of non-cash
losses resulting from accounts receivable reserves and/or write-offs recognized
by the Borrowers during such Fiscal Quarter with respect to certain
uncollectible receivables of the Borrowers and (y) $7,000,000.”


 


4.             Amendment to Definition of
Letter of Credit Sublimit.  The
definition of Letter of Credit Sublimit set forth in Section 1.01 is hereby
amended by deleting such subsection in its entirety and replacing it with the
following:


 


“Letter of Credit
Sublimit” means $2,500,000.”


 


5.             Amendment to Definition of
Revolving Credit Commitments.  The
definition of Revolving Credit Commitments is hereby amended by deleting such
definition in its entirety and replacing it with the following:


 


“Revolving Credit
Commitments” means, the commitments of the Lenders to make Revolving Credit
Loans to the Borrowers as in effect from time to time hereunder.  The aggregate amount of Revolving Credit
Commitments shall initially equal $20,000,000 and may be reduced pursuant to §
2.10.”


 


6.             Amendment to Schedule 2.01(a).  The amended Schedule 2.01(a) attached
hereto is hereby incorporated into the Credit Agreement as of the date hereof
and each reference in the Credit Agreement to such Schedule shall be deemed to
refer to such Schedule attached hereto on and after the date hereof.


 


7.             Amendment to Section 7.11.  Section 7.11 of the Credit Agreement is
hereby amended by deleting such section in its entirety and replacing it with
the following:


 


“Section 7.11       Field Audits.  The Borrowers will permit the Agent to
conduct field audit examinations of, among other things, the Borrowers’ and
their Subsidiaries’ assets, liabilities, books, records, billing and collection
processes and management information systems once each Fiscal Year; provided that
(i) in the event that the sum of (x) the average outstanding principal amount
of all Loans plus (y) the average Letter of Credit Exposure


 


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exceeds $5,000,000 for a
period of 30 consecutive days, the Agent shall thereafter have the right to
conduct field audit examinations twice each Fiscal Year; and (ii) the Agent
shall have the right to conduct field audit examinations at times and with such
frequencies as the Agent deems appropriate upon the occurrence and during the
continuance of a Default.  Each Lender
shall have the right to participate, in a manner reasonably acceptable to such
Lender, in such field audit examinations. 
The Borrowers will reimburse the Agent for the expense of each field
audit examination at the Agent’s standard per diem rate per person, plus
out-of-pocket expenses.  In connection
with such field audits, the Borrowers will permit the Agent to make test
verifications of the Accounts with the Borrowers’ and their Subsidiaries’ customers.”


 


8.             Amendment to Section 8.04.  Section 8.04 of the Credit Agreement is
hereby amended by deleting such Section in its entirety and replacing it with
the following:


 


“Section 8.04.        Dividends and Stock Repurchases.  Declare or pay any dividends, purchase,
redeem, retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding, or make any distribution of assets to its stockholders
as such whether in cash, assets or in obligations of the Borrowers, or allocate
or otherwise set apart any sum for the payment of any dividend or distribution
on, or for the purchase, redemption or retirement of any shares of its capital
stock, or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock or permit any Subsidiary to purchase
or otherwise acquire for value any stock of the Borrowers or another
Subsidiary, except that:  (a) Option
Care may declare and deliver dividends and make distributions payable solely in
common stock of Option Care; (b) so long as no Default or Event of Default
shall have occurred and be continuing and no Default or Event of Default shall
be caused thereby, Option Care may declare and pay cash dividends and make cash
distributions; provided that the aggregate cash paid by Option Care
during any fiscal year in respect of dividends and distributions shall not
exceed $2,500,000; (c) Option Care may purchase or otherwise acquire shares of
its capital stock for cash from employees or directors in connection with the termination
of their employment or affiliation with Option Care and pursuant to employee
stock redemption plans; provided that the aggregate cash consideration
paid by Option Care for all such shares does not exceed $500,000 during any
fiscal year; and (d) Option Care may purchase, redeem or otherwise acquire
shares of its capital stock from stockholders (collectively, “Share
Repurchases”); provided that (i) the aggregate cash consideration
paid by Option Care for all Share Repurchases after the Effective Date shall
not exceed $8,000,000, (ii) notwithstanding anything set forth in Section 9.03
to the contrary, after giving effect to each Share Repurchase, the Borrowers
shall have Collateral Availability of not less than $2,000,000 and (iii) after
giving effect to each Share Repurchase, the Total Leverage Ratio of the
Borrowers shall not exceed 2.25 to 1.00 on a proforma basis for the twelve
months most recently ended.  In
addition, if, as a result of any proposed Share Repurchase, the aggregate cash
consideration paid by Option Care for all Share Repurchases after the Effective
Date shall exceed either (x) $4,000,000 or (y) $6,500,000, the Borrowers shall
deliver to the Agent not earlier than three (3) Banking Days prior to the
consummation of such Share Repurchase, a certificate of the CFO of Option Care
in form reasonably satisfactory to the Agent confirming compliance with the
conditions set forth in clauses (ii) and (iii) of clause (d) of this Section
8.04.”


 


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9.             Amendment to Section 9.03.  Section 9.03 of the Credit Agreement is
hereby amended by deleting such Section in its entirety and replacing it with
the following:


 


“Section 9.03         Minimum Collateral Availability.  The Borrowers shall not permit the Collateral
Availability at any time to be less than $2,000,000.”


 


10.           Special Representations and
Warranties with respect to the Clinical Resource Sale.  The Borrowers hereby represent and warrant
to the Agent and each Lender that (i) the assets sold by Option Care
Enterprises, Inc. in connection with the Clinical Resource Sale constitute all
of the assets used by Clinical Resource Network in the conduct of its business
prior to the Clinical Resource Sale; (ii) the principal amount of the Clinical
Resource Promissory Note represents the total amount of the Borrowers’
investment in Clinical Resource Network and no revenues or Accounts were
generated by Clinical Resource Network in the conduct of its business; (iii) no
Accounts or inventory were sold, leased, assigned or otherwise transferred by
Option Care Enterprises, Inc. in connection with the Clinical Resource Sale and
(iv) after giving effect to the Clinical Resource Sale, Clinical Resource
Network no longer conducts business and does not own or hold any property or
assets.


 


11.           Waiver with respect to Dissolution
of Clinical Resource Network, Inc. 
The Borrowers have informed the Agent that they wish to dissolve
Clinical Resource Network.  Based upon
the representations set forth in Section 10 hereof, the Agent and the Lenders
hereby waive the provisions of Sections 8.02 and 10.01(e)(3) to the extent
necessary to permit the Borrowers to dissolve Clinical Resource Network.


 


12.           Effectiveness.  This Amendment shall be not deemed effective
until the Agent receives (i) the Webster Assignment duly executed by Webster
Bank and (ii) duly executed copies of this Amendment from the Lenders and the
Borrowers.


 


13.           Assignment of Clinical Resource
Promissory Note.  Within 30 days
after the effective date of this Amendment, Option Care Enterprises, Inc. shall
deliver to the Agent an assignment of the Clinical Resource Promissory Note to
the Agent for the benefit of the Lenders in form and substance satisfactory to
the Agent.  Such assignment shall
provide that all payments of principal and interest payable to or received by
Option Care Enterprises, Inc. under the Clinical Resource Promissory Note shall
be paid directly to the Agent for the benefit of the Lenders.


 


14.           LaSalle Blocked Account Agreement.  Within 30 days after the effective date of
this Amendment, the Borrowers, LaSalle Bank National Association and the Agent
shall execute and deliver a tri-party blocked account agreement in form and
substance satisfactory to the Agent with respect to the bank account maintained
by the Borrowers at LaSalle Bank National Association.


 


15.           Representations and Warranties;
Events of Default.  Each Borrower
hereby represents and warrants to the Agent and each Lender that to such
Borrower’s knowledge:  (i) except as
otherwise disclosed in the schedules attached to the Credit Agreement, all of
the representations and warranties of the Borrowers set forth in the Credit
Agreement are true and correct in all material respects with the same force and
effect as if made on and as of the date of this Amendment; (ii) there exists no
Default or Event of Default; and (iii) no material litigation proceedings or
investigations relating to any of the Borrowers are pending.


 


16.           Miscellaneous.


 


(a)           The Credit Agreement, as amended by
this Amendment, and each of the other Facility Documents shall remain in full
force and effect and are hereby ratified and confirmed in all respects.  The


 


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execution,
delivery and effectiveness of this Amendment shall not operate as a waiver of
any right, power or remedy of the Agent or the Lenders under the Facility
Documents, nor constitute a waiver of any provision of the Facility Documents
except as specifically set forth herein.


 


(b)           Each of the Borrowers hereby
ratifies, affirms, acknowledges and agrees that the Credit Agreement and the
other Facility Documents represent the valid, enforceable and collectible
obligations of each Borrower, and each Borrower further acknowledges that there
are no existing claims, defenses, personal or otherwise, or rights of setoff
whatsoever with respect to the Credit Agreement or any of the other Facility
Documents.  Each Borrower hereby agrees
that this Amendment in no way acts as a release or relinquishment of the Liens
securing the Obligations, and such Liens are hereby ratified and confirmed by
each Borrower in all respects.


 


(c)           THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.


 


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IN WITNESS WHEREOF, the parties have caused
this Fifth Amendment to Credit and Security Agreement to be executed and
delivered by their proper and duly authorized officers as of the date first
above written.  


 


BORROWERS


 


OPTION
CARE, INC., a Delaware corporation,

OPTION CARE, INC., a California corporation

MANAGEMENT BY INFORMATION, INC.

OPTION CARE HOME HEALTH OF CALIFORNIA, INC.

OPTION CARE OF OKLAHOMA, INC.

OPTIONET, INC.

HOME HEALTH OF OPTION CARE, INC.

OPTION CARE ENTERPRISES, INC., a
   
Delaware corporation

OPTION CARE HOSPICE, INC. 

OPTION CARE ENTERPRISES, INC., a
    Pennsylvania corporation

OPTION CARE OF DENVER, INC.

OPTION HOME HEALTH, INC.

OPTIONMED, INC.

EXCEL HEALTHCARE, L.L.C.

REHAB OPTIONS, INC.

NORTH COUNTY HOME I.V., INC.

SPRINGVILLE PHARMACY INFUSION
    THERAPY, INC.

INFUSION SPECIALTIES, INC.

OPTION CARE OF NEW YORK, INC.

OPTION CARE ENTERPRISES OF NEW
    YORK, INC.


 


 


	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Richard M. Smith

  
	
   

  	
  Title:

  	
  President and Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Joseph P. Bonaccorsi

  
	
   

  	
  Title:

  	
  Secretary

  



 


 


[Signature Page to Fifth Amendment to


Credit and Security Agreement]


 

















 


	
   

  	
  OPTION CARE HOME HEALTH, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Richard
  M. Smith

  
	
   

  	
  Title:

  	
  President
  and Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Joseph
  P. Bonaccorsi

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  Option
  Care Enterprises, Inc., a member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Richard M. Smith

  
	
   

  	
  Title:

  	
  President and Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Joseph P. Bonaccorsi

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CLINICAL
  RESOURCE NETWORK, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Gail Adinamis

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Joseph Bonaccorsi

  
	
   

  	
  Title:

  	
  Secretary

  
												



 


[Signature Page to Fifth Amendment to


Credit and Security Agreement]


 

















 


	
   

  	
  AGENT AND LENDER:

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE
  BANK, in its capacities as Administrative and Collateral Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  
	
   

  	
  Title:

  



 


[Signature Page to Fifth Amendment to


Credit and Security Agreement]


 

















 


	
   

  	
  ADDITIONAL LENDER:

  
	
   

  	
   

  
	
   

  	
  LASALLE BANK
  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  
	
   

  	
  Title:

  



 


[Signature Page to Fifth Amendment to


Credit and Security Agreement]


 

















 


Schedule 2.01(a)


 


to


 


OPTION
CARE, INC.


 


Credit
Agreement


 


List
of Lenders and Commitments


 




	
  Name of Lender

  	
   

  	
  Revolving
  Credit

  Commitment

  Amount

  	
   

  	
  Revolving
  Credit

  Commitment

  Percentage

  	
   

  
	
  JPMorgan Chase Bank

  	
   

  	
  13,333,333.34

  	
   

  	
  66.6666667

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LaSalle Bank National Association

  	
   

  	
  6,666,666.66

  	
   

  	
  33.3333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  100.0000000

  	
  %

  
							






 


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